House of Control : 2022-Q2 and H1 Report

INTERIM REPORT Q2 AND H1 2022

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Interim report Q2 and H1 2022

House of Control - The CFO's Best Friend

House of Control Group is a tech company that develops software as a service (SaaS) solutions for contract management and IFRS 16 compliance. The CFO and the finance departments of medium‐sized and large companies are the main target groups, and the group's software helps them improve financial and operational management. Private and public enterprises use the software to manage contracts and assets, communicate with suppliers, and get a faster overview over their business via dashboards. The CFO toolkit contributes to at least four important tasks: Cut costs, save time, reduce risk, and improve compliance - all key ingredients of a better‐ working finance department. House of Control's strong revenue growth is supported by a unique salesforce, with recurring revenues accounting for approximately 95 per cent of total sales.

• Best‐of‐breed horizontal software for CFOs across the Nordics
• Large and underpenetrated market opportunity with limited direct competition
• Scalable subscription‐based model with high recurring revenue
• Consistent organic growth supported by M&A
• Growth levers in increased penetration, upselling in existing portfolio and new products and services
• Opportunities in European expansion

Revenue last 12 months (NOKm)			ARR (NOKm)*
225								225
200							204	200							208
175							175						195
					177
150							150
125					125			125					128
100							100
										102
75				94				75			83
50			71					50
	52						58
25	45						25	43
0								0
2016	2017	2018	2019	2020	2021	H1 2022	2016	2017	2018	2019	2020	2021	H1 2022

*ARR continuing business, excluding the divested 'on‐premises' business

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Interim report Q2 and H1 2022

Highlights for the second quarter 2022

• Annual recurring revenue (ARR) of NOK 208 million
• • Growth of 35% for continuing business, including NOK 28 million in acquired ARR
  • Organic ARR growth of 17%, mainly reflecting new sales in the period
  • ARR from new customers of NOK 8 million in Q2 (9), with net retention at 101% (99%)
• Revenue of NOK 52.9 million in Q2 (+30%), with organic growth at 19%
• EBITDA of NOK 0.5 million, with adjusted EBITDA of NOK 1.7 million excluding special items
• Employee base reduced by 26% year to date, yielding annual cost savings of approximately NOK 45 million
• Expecting positive EBITDA in FY 2022 and positive Cash EBITDA including capitalized R&D investments from mid‐2023

Key figures

NOK ('000), IFRS	Q2 21	Q3 21	Q4 21	Q1 22	Q2 22	%	H1 2021	H1 2022	%
Recurring revenue	38 645	41 748	49 365	50 660	50 256	30 %	73 633	100 916	37 %
Other revenue	1 939	2 432	3 325	3 373	2 602		6 661	5 974
Total revenue	40 583	44 179	52 689	54 033	52 858	30 %	80 294	106 891	33 %
Operating costs	‐40 484	‐51 576	‐71 080	‐57 019	‐52 390		‐82 895	‐109 409
EBITDA	99	‐7 397	‐18 391	‐2 987	469		‐2 601	‐2 518
EBITDA‐margin	0 %	‐17 %	‐35 %	‐6 %	1 %		‐3 %	‐2 %
Special items	‐3 973	‐3 811	‐13 362	‐1 036	‐1 196		‐7 651	‐2 232
Adjusted EBITDA	4 072	‐3 586	‐5 029	‐1 951	1 664		5 050	‐287
Adjusted EBITDA‐margin	10 %	‐8 %	‐10 %	‐4 %	3 %		6 %	0 %
Amortization PPA	‐5 963	‐6 239	‐8 192	‐5 539	‐5 895		‐11 374	‐11 434
Depr. / amort. tangible and intangible	‐6 272	‐5 987	‐6 575	‐6 117	‐5 845		‐11 738	‐11 962
Impairment	‐	‐	‐52 761	‐11	0		0	‐11
Total depr., amort., and impairment	‐12 235	‐12 226	‐67 528	‐11 667	‐11 739		‐23 112	‐23 407
Net other income	‐	‐	‐	65	22		0	87
Operating profit/loss, EBIT	‐12 135	‐19 623	‐85 919	‐14 589	‐11 249		‐25 713	‐25 838
Net financial items	‐4 999	‐5 689	‐5 428	‐5 943	‐5 005		‐10 860	‐10 948
Profit/loss before tax	‐17 134	‐25 313	‐91 347	‐20 532	‐16 255		‐36 572	‐36 786
R&D Capex	7 189	6 845	10 443	8 167	6 862		15 811	15 030
R&D Capex, % of revenue	18 %	15 %	20 %	15 %	13 %		20 %	14 %
Adjusted Cash EBITDA*	‐3 117	‐10 431	‐15 472	‐10 118	‐5 198		‐10 761	‐15 317
*Adjusted Cash EBITDA defined as Adjusted EBITDA less R&D Capex
NOKm	Q2 21	Q3 21	Q4 21	Q1 22	Q2 22	%	H1 2021	H1 2022	%
ARR, continuing business*	154	171	195	199	208	35%	154	208	35%
New customers, ARR	9	5	9	6	8	‐14%	17	14	‐17%
Net retention, %	99%	100%	100%	99%	101%	+2%	97%	99%	+2%

*ARR for the continuing business, i.e., excluding the divested on‐premises business

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Interim report Q2 and H1 2022

Message from the CEO

With a considerably lower cost base, House of Control has accelerated its path to profitability. We are on track for a positive EBITDA in 2022 and a positive Cash EBITDA after R&D investments from mid‐2023.

Focus on profitable growth

Annual recurring revenue (ARR) was NOK 208 million at the end of the second quarter. Net retention was 101 per cent, up from 99 per cent in the previous quarter. Total year‐on‐year ARR growth was NOK 54 million, up 35 per cent. Organic growth was 17 per cent over the past year.

Strong product‐market fit

We launched a pilot with our IFRS 16 software solution in selected international markets in the first quarter and signed up the first clients during the second quarter. We believe that our unique IFRS 16 compliance software is the best on the market, and that our IFRS 16 solution can be a spearhead into new geographical markets. Even though we have focused on European markets - and have signed clients in the Netherlands and Ireland - we have also signed up new customers in Canada and in the United Arab Emirates. IFRS 16 compliance is an international challenge, and this opens a significant addressable market for our software outside of our home base in Scandinavia. We are also seeing demand for general advisory services on top of our IFRS 16 software and have now begun to monetize our expertise within this area.

Our Complete Control contract management solution continues to capture market share and attract new customers. We have continuously upgraded and added functionality to Complete Control, and over the past year we have also broadened the portfolio with powerful add‐ons such as CFO dashboard solutions that integrate all business process systems, budgeting & forecasting solutions, digital signature, and workflow solutions. We believe these add‐ons will help to drive revenue and margins going forward.

We will continue to evolve our product offering by adding more features and functionality to our existing products as well as developing new solutions for our customers. Our ability to offer market leading products and solutions will continue to be the foundation of profitable growth.

Significant cost reductions

overall reduced the employee base by 26 per cent from the beginning of the year to mid‐August. When the resulting cost savings take full effect, this should translate into a reduction of the annual cost base by approximately NOK 45 million.

Positive EBITDA in 2022 and positive Cash EBITDA from mid‐ 2023

We turned EBITDA positive in the second quarter and expect the positive trend to continue in the second half of the year and into 2023. This means we expect to show positive EBITDA for the full year 2022. Adjusted Cash EBITDA has improved from negative NOK 15 million in the fourth quarter 2021 to negative NOK 5 million in the second quarter 2022. This confirms that we are on track to reach our targeted positive Cash EBITDA after capitalized R&D investment from mid‐2023.

This will support our already healthy liquidity position and help fund our longer‐term growth ambitions.

House of Control has been engaged in customer‐driven innovation for more than 16 years. Over the past several years, we have built a strong brand and established ourselves as a leader in our industry. Our achievements are the result of the hard work of our employees, satisfied customers, and the dedication of our shareholders. We remain dedicated to profitable growth going forward.

"With a considerably lower cost base,

we have accelerated our path to

profitability"

CEO Lasse Sten, House of Control

Looking ahead, one of the top priorities is to make sure that our top‐notch team further improves sales execution and drive growth. However, the capital market sentiment has changed dramatically over the past year, with the focus shifting from maximizing longer‐term growth to the ability to demonstrate near‐term profitable growth and cash flows.

Adapting to this shift in sentiment, we started implementing cost reductions right from the beginning of the year. Including the divestment of the non‐core on‐premises business we have

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Interim report Q2 and H1 2022

Operational review

ARR growth picking up from Q1

ARR by geographical area

ARR increased by NOK 9 million to NOK 208 million in the second quarter, reflecting new sales of NOK 8 million and a positive net retention rate of 101%.

In the previous quarter ARR declined by NOK 12 million to NOK 199 million, reflecting that organic growth of NOK 4 million could only partly offset an ARR reduction of NOK 16 million due to the divestment of the non‐core on‐premises business.

Q2 ARR development, NOK million

225

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8

200				5
175		199			208
150
ARR Q1'22 New sales Upsell &	Churn ARR Q2'22
			Cross‐sell

Source: Company data.

The ARR is generated from a customer base of more than 2,700 unique customers of different sizes in all kinds of sectors. The portfolio has limited concentration as the top‐10 customers accounting for only around 4% of total revenue.

Source: Company data.

Product overview

Branding itself as "The CFO's best friend", House of Control has built a strong product portfolio within contract management and adjacent areas. This includes the product Complete Control; a fully digital cloud‐based contract management system maintain control throughout the contract lifecycles.

This makes it easy for customers to create, gather, store, and find their contracts, subscriptions, leases, or any other type of agreement, and saves time and reduces risk and costs for the customers.

The company is constantly upgrading, improving, and adding more functionality to Complete Control. Over the past few years, the group has acquired a series of companies that offer add‐ons to the Complete Control platform and build further value for customers.

ARR by geography

House of Control's Scandinavian business accounts for approximately 97% of the total ARR of NOK 208 million, with Norway at NOK 143 million (69%), Sweden at NOK 38 million (18%), and Denmark at NOK 21 million (10%). The company also has NOK 6 million (3%) of ARR in Europe, Australia, and Canada.

All geographical areas showed growth in the first half of 2022, although contraction and churn has held back the progress in the Swedish operation. Although absolute numbers are still relatively small, the company gained traction outside of Scandinavia after launching its IFRS 16 solution internationally in the first quarter.

Keeping things straightforward for its customers, the company has decided to simplify the commercial offering into two main solutions: Contract management - Complete Control and IFRS 16 software.

The company launched a pilot version of its IFRS 16 solution in selected international markets during the first quarter and have gained traction with customer sales both in Europe and Canada. House of Control believes its IFRS 16 solution is the best on the market and is currently introducing IFRS 16 advisory services on top of its software solutions to monetize its expertise in the area.

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